Disappointment over the status-quoist stance of the Reserve Bank of India at its sixth monetary policy review for the current fiscal, coupled with a weak rupee and flat global indices, depressed the Indian equity markets on Tuesday.
This led to a barometer index of the Indian equity markets to close the day's trade on a negative note -- down by 286 points.
Initially, both the bellwether indices of the Indian equity markets opened on a firm note as investors anticipated an easing of key lending rates.
However, sentiments were subdued following the Reserve Bank of India's (RBI) decision to keep the repo and reverse repo rates unchanged in the current fiscal's final bi-monthly monetary policy review.
Ignoring the clamour for an easing of monetary policy as an instrument to boost the fledgling economic growth, India's central bank maintained its short-term lending rates.
The RBI's decision and flat Asian markets dented sentiments.
Besides, a weak rupee unnerved investors. It weakened by 14 paise at 67.98 to a US dollar from its previous close of 67.84 to a greenback.
"Rupee was choppy since morning. Against the US dollar it ended weaker by 67.98 level on spot," Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.
"Importer demand and demand for US dollars in offshore centres supported the (rupee-dollar) pair at lower levels."
According to Banerjee, Chinese officials have dropped several hints about allowing yuan to drop from its current levels and that is exerting downward pressure on other Asian currencies like the rupee.
Nevertheless, the markets briefly pared their losses on the back of a dovish RBI stand on future interest rates and non-performing assets (NPAs) of commercial banks.
However, absence of any positive triggers and caution over the upcoming budget and doubts over the government's ability to perk up investments spiked volatility and dipped Indian indices.
Markets came under an intense selling pressure in the last hour of the day's trade with the benchmarks ending firmly in the negative.
The broader markets saw an even sharper sell-off with an advance decline ratio of nearly 1:2.
Consequently, the barometer 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) lost 286 points -- or 1.15 percent -- at the closing.
Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) ended in the negative territory. It plunged by 100.40 points, or 1.33 percent, at 7,455.55 points.
The S&P BSE Sensex, which opened at 24,868.21 points, closed at 24,539 points -- down 285.83 points or 1.15 percent from the previous day's close at 24,824.83 points.
It touched a high of 24,928.75 points and a low of 24,460.53 points during the intra-day trade.
The S&P BSE market breadth favoured the bears -- with 1,841 declines and 856 advances.
"Disappointment from the RBI's monetary policy review and a weak rupee subdued markets. However, investors' risk-taking appetite was given a boost from a dovish RBI outlook and measures like relaxation for start-ups," Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.
"However, markets remained volatile and closed deep in the red due to absence of any fresh triggers and concerns over the government's ability to perk-up investments."
Vaibhav Agarwal, vice president and research head at Angel Broking, elaborated that as corporate earnings continue to remain weak, the India markets would now shift focus towards the budget for further cues.
"We expect to see some more downside before we see a budget rally," pointed out Agarwal.
Nitasha Shankar, vice president for research with YES Securities, blamed the sharp sell-off in late trade for dragging down Indian markets lower.
"Volumes picked up in the selling suggesting choppy trading sessions going ahead. Global markets continue to be choppy and weak leading to this correction in our markets," Shankar noted.
"Broader markets also declined sharply lower in line with the headline indices as profit booking was seen across the board. Banking index gave up its morning gains to end on a weak note."
All sector-based indices of the BSE ended in the red.
The S&P BSE healthcare index plunged by 399.88 points, metal index plummet by 300.52 points, banking index receded by 291.46 points, S&P BSE oil and gas index depleted by 239.26 points and automobile index edged-lower by 236.75 points.
Both domestic institutional investors (DIIs) and foreign institutional investors (FIIs) turned net sellers during the day's trade.
The data with stock exchanges showed that DIIs divested Rs.323.23 crore, while the FIIs' sold stocks worth Rs.113.98 crore.
Major Sensex gainers during Tuesday's trade were Bharti Airtel, up 1.92 percent at Rs.302.20; Bajaj Auto, up 1.48 percent at Rs.2,362.55; Infosys, up 0.30 percent at Rs.1,174.80; Lupin, up 0.28 percent at Rs.1,706.15; and Wipro, up 0.01 percent at Rs.566.50.
Major Sensex losers during the day's trade were Tata Steel, down 7.18 percent at Rs.231.50; NTPC, down 4.28 percent at Rs.134.25; Sun Pharma, down 4.12 percent at Rs.834.35; BHEL, down 3.99 percent at Rs.134.85; and Cipla, down 3.98 percent at Rs.574.
